Cornerstone Exercise 927 Algorithmic Debt Issued at a Discou

Cornerstone Exercise 9-27 (Algorithmic) Debt Issued at a Discount (Straight Line) On January 1, 2020, Drew Company issued $1,100,000, 5-year bonds for $979,000. The stated rate of interest was 7% and interest is paid annually on December 31 Required: Prepare the amortization table for Drew Company\'s bonds. If an amount box does not require an entry, leave it blank and if the answer is zero, enter \"O\". Drew Company Amortization Table Period Cash Payment (Credit) Interest Expense (Debit) Discount on Bonds Payable (Credit) Discount on Bonds Payable Balance Carrying Value 12/31/20 12/31/21 12/31/22 12/31/23 12/31/24

Solution

Par value of Bonds 1100000 Less: Issue price 979000 Discount on bonds 121000 Annual Amortization of discount 24200 (121000/5 years) Amortization Table: Period Cash Interest Discount on Discount on Carrying Payment Expense Bonds payable Bonds payable Value Balance At issue 121000 979000 31.12.20 77000 101200 24200 96800 1003200 31.12.21 77000 101200 24200 72600 1027400 31.12.22 77000 101200 24200 48400 1051600 31.12.23 77000 101200 24200 24200 1075800 31.12.24 77000 101200 24200 0 1100000